Why plummeting German property prices hurt tenants?

Feb 6 | 2 minutes read
German real estate tenants

German real estate prices have risen for over a decade, thus a decline is to be anticipated. Tenants should expect to pay a larger monthly payment as a result.

The German housing market is currently experiencing the effects of rising interest rates, high building prices, and record inflation. And it affects both homebuyers and renters.


Real estate prices are beginning to drop in some areas, but many people still can't afford to buy a home because obtaining a mortgage has become much more difficult as a result of the current situation, which has been brought on by Russia's war on Ukraine, which sparked the energy crisis, and other factors. Meanwhile, businesses are pulling back on new building projects.


As a result, renters are increasingly forced to choose more expensive options, such as apartments that are already on the market for rent. And yet, that's not the whole story. Prospective homeowners with money are in a little better position now that property prices are beginning to drop, even in some major cities.

According to Mirjam Mohr, Senior Vice President Private Clients at Interhyp, a loan broker, "We are currently witnessing more offers on the real estate market and increased possibility for price discussions."


Prices for single-family homes were down 0.4% on average from the second to the third quarter, per data from the Federal Statistical Office. As reported by the Association of German Pfandbrief Banks (VDP), this is the first negative reading since 2010. Prices went up, albeit not by much, when compared to the same quarter the year before.


The trend, analysts agree, is expected to quicken. In 2023, a drop in property prices of up to 10 percent is possible, according to the German Institute for Economic Research (DIW).


DZ Bank, however, does not share these pessimistic projections, predicting instead a more modest drop of 4% to 6% in prices this year.


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